Differences between Public & Private Companies in Cyprus
The major differences between a public and a private company are as follows:
A public company may offer its shares, other titles or debentures, to the public while a private company cannot (section 29 of the Companies’ Law);
The name of a public company must end with the words “public limited company” (PLC) (section 4 of the Companies’ Law);
A public company must have at least two directors while a private company may only have just one (section 170 of the Companies’ Law);
There is no maximum number of shareholders in a public company while for a private company the maximum number is fifty (exclusive of employees);(section 29 of the Companies’ Law);
A public company may restrict the right to transfer its shares if its articles so permit i.e. directors may decline to accept a transfer of unpaid shares, while a private company must restrict the right to transfer its shares (section 29 of the Companies’ Law);
There cannot be any restriction on the right to transfer the shares of a public company whose shares are listed on a stock exchange;
The minimum number of shareholders in a public company is seven while in a private company is only one (section 32 of the Companies’ Law);
In case where the shareholders of a public company are reduced below 7 and the company continues its trading activity for more than 6 months, the shareholders lose their limited liability status and are liable personally in an unlimited manner for the debts of the company created during that period (section 32 of the Companies’ Law);
In a private company, shares may be allotted immediately once the certificate of incorporation is issued; a public company may not do so until it has received the minimum subscription (section 47 of the Companies’ Law);
A public company, unlike a private one, may buy-back its own shares subject to the limitations as specified by the Companies’ Law (section 57A-F of the Companies’ Law);
A public company must file a statement in lieu of a prospectus before the first allotment of its shares in case a prospectus was not issued, while a private company does not have such an obligation (section 48 of the Companies’ Law);
A private company may commence business immediately upon incorporation while a public company must comply with certain provisions of the Companies’ Law before commencing business (section 104 of the Companies’ Law);
A public company must hold a statutory meeting and file a statutory report once it is incorporated within certain time limits (section 124 of the Companies’ Law);
The procedure by which a director is appointed in a public company is different to the procedure involved with a private company (section 175 of the Companies’ Law). A proposal for the appointment of two or more directors must be made with separate/different resolutions, while in private companies the appointment may be made in one single resolution (section 177 of the Companies’ Law);
A public company is prohibited to make loans to its directors (section 182 of the Companies’ Law);
The minimum authorized and issued share capital of a public company must not be less than €25.630,00, while there is no such minimum requirement for private companies;
A public company may not issue shares at a discount while a private company may, under certain conditions issue shares at a discount (section 56 of the Companies’ Law);
A proxy of a shareholder in a private company may also speak at a general meeting while this is not possible in a public company (section 130 of the Companies’ Law);
A public company is prohibited to provide financial assistance for the direct or indirect purchase of its shares or the shares of its holding company while a private company under certain conditions is allowed to do so (section 53 of the Companies’ Law);
A public company must annually prepare audited financial statements, while a private company, if it qualifies as a small company, may prepare financial statements which do not require to be audited (section 152A of the Companies’ Law);
A public company cannot distribute dividends to its shareholders if its net assets as shown in the last annual financial statements or its net assets could result that after the distribution of dividends, are less than the sum of the issued capital and its reserves (s.169A of the Companies’ Law). In private companies, there are no specific provisions in the Law with regards to the distribution of dividends.
A public company may distribute interim dividends only if interim financial statements are prepared which show that there are available funds for such distribution (section 169C of the Companies’ Law); there is no obligation in the’ Law for a private company to prepare financial statements before the distribution of interim dividends but it is a procedure that cautious directors should follow if they do not want to be at a risk to distribute dividends otherwise than from accumulated profits. In practice generally this is also followed for private companies;
In case of past years losses or for other reasons a public company loses 50% of its share capital or the loss is in such a level that the directors consider that the company’s target is in dispute, an extraordinary general meeting must be called to decide whether the company will be dissolved or whether other measures shall be taken (section 169F of the Companies’ Law).
